Investments (Tables)
|
6 Months Ended |
Jun. 30, 2023 |
|---|
| Schedule of Investments [Line Items] |
|
| shedule of Investments in and Advances to Affiliates |
The following table summarizes the Company’s realized gains and losses and changes in unrealized appreciation and depreciation on control and affiliate investments for the three and six months ended June 30, 2023 and 2022.
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|
(in thousands) |
|
|
|
|
|
|
Three Months Ended June 30, 2023 |
|
|
Six Months Ended June 30, 2023 |
|
Portfolio Company(1) |
|
Type |
|
Fair Value as of June 30, 2023 |
|
|
Interest Income |
|
|
Fee Income |
|
|
Net Change in Unrealized Appreciation (Depreciation) |
|
|
Realized Gain (Loss) |
|
|
Interest Income |
|
|
Fee Income |
|
|
Net Change in Unrealized Appreciation (Depreciation) |
|
|
Realized Gain (Loss) |
|
Control Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coronado Aesthetics, LLC |
|
Control |
|
$ |
297 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
41 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(22 |
) |
|
$ |
— |
|
Gibraltar Acquisition LLC (3) |
|
Control |
|
|
44,392 |
|
|
|
731 |
|
|
|
19 |
|
|
|
2,667 |
|
|
|
— |
|
|
|
1,527 |
|
|
|
38 |
|
|
|
6,402 |
|
|
|
— |
|
Hercules Adviser LLC |
|
Control |
|
|
39,161 |
|
|
|
152 |
|
|
|
— |
|
|
|
2,566 |
|
|
|
— |
|
|
|
302 |
|
|
|
— |
|
|
|
8,008 |
|
|
|
— |
|
Tectura Corporation |
|
Control |
|
|
7,073 |
|
|
|
172 |
|
|
|
— |
|
|
|
(701 |
) |
|
|
— |
|
|
|
342 |
|
|
|
— |
|
|
|
(969 |
) |
|
|
— |
|
Total Control Investments |
|
$ |
90,923 |
|
|
$ |
1,055 |
|
|
$ |
19 |
|
|
$ |
4,573 |
|
|
$ |
— |
|
|
$ |
2,171 |
|
|
$ |
38 |
|
|
$ |
13,419 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
|
Three Months Ended June 30, 2022 |
|
|
Six Months Ended June 30, 2022 |
|
Portfolio Company(1) |
|
Type |
|
Fair Value as of June 30, 2022 |
|
|
Interest Income |
|
|
Fee Income |
|
|
Net Change in Unrealized Appreciation (Depreciation) |
|
|
Realized Gain (Loss) |
|
|
Interest Income |
|
|
Fee Income |
|
|
Net Change in Unrealized Appreciation (Depreciation) |
|
|
Realized Gain (Loss) |
|
Control Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coronado Aesthetics, LLC |
|
Control |
|
$ |
422 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(192 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(143 |
) |
|
$ |
— |
|
Gibraltar Business Capital, LLC |
|
Control |
|
|
39,064 |
|
|
|
844 |
|
|
|
17 |
|
|
|
(3,578 |
) |
|
|
— |
|
|
|
1,678 |
|
|
|
33 |
|
|
|
(4,805 |
) |
|
|
— |
|
Hercules Adviser LLC |
|
Control |
|
|
35,181 |
|
|
|
128 |
|
|
|
— |
|
|
|
8,637 |
|
|
|
— |
|
|
|
239 |
|
|
|
— |
|
|
|
11,191 |
|
|
|
— |
|
Tectura Corporation |
|
Control |
|
|
8,208 |
|
|
|
172 |
|
|
|
— |
|
|
|
(139 |
) |
|
|
— |
|
|
|
342 |
|
|
|
— |
|
|
|
(61 |
) |
|
|
— |
|
Total Control Investments |
|
$ |
82,875 |
|
|
$ |
1,144 |
|
|
$ |
17 |
|
|
$ |
4,728 |
|
|
$ |
— |
|
|
$ |
2,259 |
|
|
$ |
33 |
|
|
$ |
6,182 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Affiliate Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Black Crow AI, Inc.(2) |
|
Affiliate |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(120 |
) |
|
$ |
3,772 |
|
Pineapple Energy LLC(2) |
|
Affiliate |
|
|
3,613 |
|
|
|
76 |
|
|
|
— |
|
|
|
(1,295 |
) |
|
|
— |
|
|
|
1,123 |
|
|
|
— |
|
|
|
(422 |
) |
|
|
— |
|
Total Affiliate Investments |
|
$ |
3,613 |
|
|
$ |
76 |
|
|
$ |
— |
|
|
$ |
(1,295 |
) |
|
$ |
— |
|
|
$ |
1,123 |
|
|
$ |
— |
|
|
$ |
(542 |
) |
|
$ |
3,772 |
|
Total Control & Affiliate Investments |
|
$ |
86,488 |
|
|
$ |
1,220 |
|
|
$ |
17 |
|
|
$ |
3,433 |
|
|
$ |
— |
|
|
$ |
3,382 |
|
|
$ |
33 |
|
|
$ |
5,640 |
|
|
$ |
3,772 |
|
(1)
In accordance with Rules 3-09, 4-08(g), and Rule 10-01(b)(1) of Regulation S-X, (“Rule 3-09”, “Rule 4-08(g)”, and “Rule 10-01(b)(1)”, respectively), the Company must determine if its unconsolidated subsidiaries are considered “significant subsidiaries”. As of June 30, 2023, there were no unconsolidated subsidiaries that are considered “significant subsidiaries”. As of June 30, 2022, the Hercules Adviser, LLC qualified as a significant subsidiary pursuant to Rule 10-01(b)(1). The total revenue, operating income, and net income were $3.5 million, $(1.9) million, and $(1.8) million for the six months ended June 30, 2022.
|
| Schedule of Investment Collateral |
Concentrations of Credit Risk
The Company’s customers are primarily privately held companies and public companies which are active in the “Drug Discovery & Development", "Software”, “Consumer & Business Services”, “Healthcare Services, Other”, and “Communications & Networking" sectors. These sectors are characterized by high margins, high growth rates, consolidation and product and market extension opportunities. Value for companies in these sectors is often vested in intangible assets and intellectual property.
Industry and sector concentrations vary as new loans are recorded and loans are paid off. Loan revenue, consisting of interest, fees, and recognition of gains on equity and warrant or other equity interests, can fluctuate materially when a loan is paid off or a related warrant or equity interest is sold. Revenue recognition in any given year can be highly concentrated among several portfolio companies.
As of June 30, 2023 and December 31, 2022, the Company’s ten largest portfolio companies represented approximately 30.3% and 29.0% of the total fair value of the Company’s investments in portfolio companies, respectively. As of June 30, 2023 and December 31, 2022, the Company had six and eight portfolio companies, respectively, that represented 5% or more of the Company’s net assets. As of June 30, 2023, the Company had four equity investments representing approximately 52.6% of the total fair value of the Company’s equity investments, and each represented 5% or more of the total fair value of the Company’s equity investments. As of December 31, 2022, the Company had four equity investments which represented approximately 39.8% of the total fair value of the Company’s equity investments, and each represented 5% or more of the total fair value of such investments.
Investment Collateral
In the majority of cases, the Company collateralizes its investments by obtaining a first priority security interest in a portfolio company’s assets, which may include its intellectual property. In other cases, the Company may obtain a negative pledge covering a company’s intellectual property. The Company's investments were collateralized as follows as of June 30, 2023 and December 31, 2022:
|
|
|
|
|
|
|
|
|
Percentage of debt investments (at fair value), as of |
|
|
June 30, 2023 |
|
|
December 31, 2022 |
|
Senior Secured First Lien |
|
|
|
|
|
All assets including intellectual property |
|
50.3 |
% |
|
|
42.0 |
% |
All assets with negative pledge on intellectual property |
|
21.1 |
% |
|
|
26.1 |
% |
“Last-out” with security interest in all of the assets |
|
11.7 |
% |
|
|
11.6 |
% |
Total senior secured first lien position |
|
83.1 |
% |
|
|
79.7 |
% |
Second lien |
|
14.9 |
% |
|
|
18.4 |
% |
Unsecured |
|
2.0 |
% |
|
|
1.9 |
% |
Total debt investments at fair value |
|
100.0 |
% |
|
|
100.0 |
% |
Derivative Instruments
The Company enters into forward currency contracts from time to time to help mitigate the impact that an adverse change in foreign exchange rates would have on the value of the Company’s investments denominated in foreign currencies. The following is a summary of the fair value and location of the Company’s derivative instruments in the Consolidated Statements of Assets and Liabilities held as of June 30, 2023 and December 31, 2022:
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
|
Fair Value |
|
Derivative Instrument |
Statement Location |
|
June 30, 2023 |
|
|
December 31, 2022 |
|
Foreign currency forward contract |
Other assets |
|
$ |
(554 |
) |
|
$ |
— |
|
|
Total |
|
$ |
(554 |
) |
|
$ |
— |
|
Net realized and unrealized gains and losses on derivative instruments recorded by the Company during the three and six months ended June 30, 2023 and 2022 are in the following locations in the Consolidated Statements of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
Derivative Instrument |
Statement Location |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Foreign currency forward contract |
Net realized gain (loss) - Non-control / Non-affiliate investments |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Foreign currency forward contract |
Net change in unrealized appreciation (depreciation) - Non-control / Non-affiliate investments |
|
|
(554 |
) |
|
|
— |
|
|
|
(554 |
) |
|
|
— |
|
|
Total |
|
$ |
(554 |
) |
|
$ |
— |
|
|
$ |
(554 |
) |
|
$ |
— |
|
|
| Summary Of Fair Value and Location Of The Company's Derivative Instruments |
The following is a summary of the fair value and location of the Company’s derivative instruments in the Consolidated Statements of Assets and Liabilities held as of June 30, 2023 and December 31, 2022:
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
|
Fair Value |
|
Derivative Instrument |
Statement Location |
|
June 30, 2023 |
|
|
December 31, 2022 |
|
Foreign currency forward contract |
Other assets |
|
$ |
(554 |
) |
|
$ |
— |
|
|
Total |
|
$ |
(554 |
) |
|
$ |
— |
|
|
| Summary of Net realized and unrealized gains and losses |
Net realized and unrealized gains and losses on derivative instruments recorded by the Company during the three and six months ended June 30, 2023 and 2022 are in the following locations in the Consolidated Statements of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
Derivative Instrument |
Statement Location |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Foreign currency forward contract |
Net realized gain (loss) - Non-control / Non-affiliate investments |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Foreign currency forward contract |
Net change in unrealized appreciation (depreciation) - Non-control / Non-affiliate investments |
|
|
(554 |
) |
|
|
— |
|
|
|
(554 |
) |
|
|
— |
|
|
Total |
|
$ |
(554 |
) |
|
$ |
— |
|
|
$ |
(554 |
) |
|
$ |
— |
|
|
| Schedule of Investment Interest Income and Fee Income |
The Company’s investment portfolio generates interest, fee, and dividend income. The composition of the Company’s interest income and fee income is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Contractual interest income |
$ |
86,147 |
|
|
$ |
56,063 |
|
|
$ |
168,938 |
|
|
$ |
105,607 |
|
Exit fee interest income |
|
14,054 |
|
|
|
6,655 |
|
|
|
23,436 |
|
|
|
13,381 |
|
PIK interest income |
|
5,819 |
|
|
|
4,968 |
|
|
|
11,347 |
|
|
|
9,943 |
|
Other interest income (1) |
|
2,966 |
|
|
|
1,045 |
|
|
|
5,162 |
|
|
|
2,052 |
|
Total interest income |
$ |
108,986 |
|
|
$ |
68,731 |
|
|
$ |
208,883 |
|
|
$ |
130,983 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Recurring fee income |
$ |
2,135 |
|
|
$ |
1,907 |
|
|
$ |
4,175 |
|
|
$ |
3,686 |
|
Fee income - expired commitments |
|
108 |
|
|
|
433 |
|
|
|
351 |
|
|
|
521 |
|
Accelerated fee income - early repayments |
|
5,002 |
|
|
|
1,044 |
|
|
|
7,912 |
|
|
|
2,082 |
|
Total fee income |
$ |
7,245 |
|
|
$ |
3,384 |
|
|
$ |
12,438 |
|
|
$ |
6,289 |
|
(1)
Other interest income includes OID interest income and interest recorded on other assets.
|
| Schedule of Unamortized Capitalized Fee Income |
As of June 30, 2023 and December 31, 2022, unamortized capitalized fee income was recorded as follows:
|
|
|
|
|
|
|
|
(in millions) |
June 30, |
|
|
December 31, |
|
|
2023 |
|
|
2022 |
|
Offset against debt investment cost |
$ |
43.9 |
|
|
$ |
43.1 |
|
Deferred obligation contingent on funding or other milestone |
|
12.2 |
|
|
|
10.9 |
|
Total Unamortized Fee Income |
$ |
56.1 |
|
|
$ |
54.0 |
|
|
| Schedule of Loan Exit Fees Receivable |
As of June 30, 2023 and December 31, 2022, loan exit fees receivable were recorded as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
June 30, |
|
|
December 31, |
|
|
2023 |
|
|
2022 |
|
Included within debt investment cost |
$ |
32.5 |
|
|
$ |
32.5 |
|
Deferred receivable related to expired commitments |
|
3.5 |
|
|
|
5.0 |
|
Total Exit Fees Receivable |
$ |
36.0 |
|
|
$ |
37.5 |
|
|
| Industry Sector |
|
| Schedule of Investments [Line Items] |
|
| Investment Holdings, Schedule of Investments [Table Text Block] |
The following table shows the fair value of the Company’s portfolio by industry sector as of June 30, 2023 and December 31, 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
June 30, 2023 |
|
|
December 31, 2022 |
|
|
Investments at
Fair Value |
|
|
Percentage of
Total Portfolio |
|
|
Investments at
Fair Value |
|
|
Percentage of
Total Portfolio |
|
Drug Discovery & Development |
$ |
1,137,725 |
|
|
|
36.5 |
% |
|
$ |
1,150,707 |
|
|
|
38.8 |
% |
Software |
|
891,438 |
|
|
|
28.6 |
% |
|
|
798,264 |
|
|
|
26.9 |
% |
Consumer & Business Services |
|
459,276 |
|
|
|
14.8 |
% |
|
|
439,384 |
|
|
|
14.8 |
% |
Healthcare Services, Other |
|
220,673 |
|
|
|
7.1 |
% |
|
|
198,763 |
|
|
|
6.7 |
% |
Communications & Networking |
|
105,343 |
|
|
|
3.4 |
% |
|
|
101,833 |
|
|
|
3.4 |
% |
Diversified Financial Services |
|
94,077 |
|
|
|
3.0 |
% |
|
|
68,569 |
|
|
|
2.3 |
% |
Information Services |
|
73,306 |
|
|
|
2.4 |
% |
|
|
60,759 |
|
|
|
2.0 |
% |
Manufacturing Technology |
|
49,596 |
|
|
|
1.6 |
% |
|
|
46,109 |
|
|
|
1.6 |
% |
Biotechnology Tools |
|
33,465 |
|
|
|
1.1 |
% |
|
|
32,825 |
|
|
|
1.1 |
% |
Electronics & Computer Hardware |
|
20,727 |
|
|
|
0.7 |
% |
|
|
21,517 |
|
|
|
0.7 |
% |
Media/Content/Info |
|
11,542 |
|
|
|
0.4 |
% |
|
|
35 |
|
|
|
0.0 |
% |
Sustainable and Renewable Technology |
|
11,333 |
|
|
|
0.4 |
% |
|
|
15,486 |
|
|
|
0.5 |
% |
Consumer & Business Products |
|
1,294 |
|
|
|
0.0 |
% |
|
|
2,821 |
|
|
|
0.1 |
% |
Semiconductors |
|
1,188 |
|
|
|
0.0 |
% |
|
|
21,921 |
|
|
|
0.7 |
% |
Medical Devices & Equipment |
|
1,052 |
|
|
|
0.0 |
% |
|
|
1,834 |
|
|
|
0.1 |
% |
Surgical Devices |
|
731 |
|
|
|
0.0 |
% |
|
|
3,038 |
|
|
|
0.1 |
% |
Drug Delivery |
|
23 |
|
|
|
0.0 |
% |
|
|
90 |
|
|
|
0.0 |
% |
Total |
$ |
3,112,789 |
|
|
|
100.0 |
% |
|
$ |
2,963,955 |
|
|
|
100.0 |
% |
|
| Geographic Location |
|
| Schedule of Investments [Line Items] |
|
| Investment Holdings, Schedule of Investments [Table Text Block] |
A summary of the Company’s investment portfolio, at value, by geographic location as of June 30, 2023 and December 31, 2022 is shown as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
June 30, 2023 |
|
|
December 31, 2022 |
|
|
Investments at
Fair Value |
|
|
Percentage of
Total Portfolio |
|
|
Investments at
Fair Value |
|
|
Percentage of
Total Portfolio |
|
United States |
$ |
2,755,178 |
|
|
|
88.5 |
% |
|
$ |
2,670,520 |
|
|
|
90.1 |
% |
United Kingdom |
|
200,455 |
|
|
|
6.5 |
% |
|
|
171,629 |
|
|
|
5.8 |
% |
Netherlands |
|
87,664 |
|
|
|
2.8 |
% |
|
|
88,915 |
|
|
|
3.0 |
% |
Israel |
|
53,019 |
|
|
|
1.7 |
% |
|
|
9,052 |
|
|
|
0.3 |
% |
Canada |
|
11,264 |
|
|
|
0.4 |
% |
|
|
19,472 |
|
|
|
0.7 |
% |
Denmark |
|
3,767 |
|
|
|
0.1 |
% |
|
|
— |
|
|
|
0.0 |
% |
Germany |
|
999 |
|
|
|
0.0 |
% |
|
|
990 |
|
|
|
0.0 |
% |
Other |
|
443 |
|
|
|
0.0 |
% |
|
|
573 |
|
|
|
0.0 |
% |
Ireland |
|
— |
|
|
|
0.0 |
% |
|
|
2,804 |
|
|
|
0.1 |
% |
Total |
$ |
3,112,789 |
|
|
|
100.0 |
% |
|
$ |
2,963,955 |
|
|
|
100.0 |
% |
|
| Security Type Member |
|
| Schedule of Investments [Line Items] |
|
| Investment Holdings, Schedule of Investments [Table Text Block] |
The following table shows the fair value of the Company’s portfolio of investments by asset class as of June 30, 2023 and December 31, 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
June 30, 2023 |
|
|
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments at
Fair Value |
|
|
Percentage of
Total Portfolio |
|
|
Investments at
Fair Value |
|
|
Percentage of
Total Portfolio |
|
Senior Secured Debt |
$ |
2,878,923 |
|
|
|
92.5 |
% |
|
$ |
2,741,388 |
|
|
|
92.5 |
% |
Unsecured Debt |
|
59,019 |
|
|
|
1.9 |
% |
|
|
54,056 |
|
|
|
1.8 |
% |
Preferred Stock |
|
41,249 |
|
|
|
1.4 |
% |
|
|
41,488 |
|
|
|
1.4 |
% |
Common Stock |
|
94,931 |
|
|
|
3.0 |
% |
|
|
92,484 |
|
|
|
3.1 |
% |
Warrants |
|
34,314 |
|
|
|
1.1 |
% |
|
|
30,646 |
|
|
|
1.1 |
% |
Investment Funds & Vehicles |
|
4,353 |
|
|
|
0.1 |
% |
|
|
3,893 |
|
|
|
0.1 |
% |
Total |
$ |
3,112,789 |
|
|
|
100.0 |
% |
|
$ |
2,963,955 |
|
|
|
100.0 |
% |
|